> Comparative advantage is why differing wages don't matter

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Phillip_McCavity
#1 2019-03-14 01:30:18

Comparative advantage is why differing wages don't matter

Comparative advantage says that even if China could make every single good better than the US, there would still be plenty of jobs for us.

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WithoutFroth
#2 2019-03-14 01:32:10

Re: Comparative advantage is why differing wages don't matter

That works if you're Mustapha Mond and operate at the trans-national level.

Meanwhile, in the real world wages matter a lot to individuals.

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Phillip_McCavity
#3 2019-03-14 01:44:59

Re: Comparative advantage is why differing wages don't matter

WithoutFroth wrote:

That works if you're Mustapha Mond and operate at the trans-national level.

Meanwhile, in the real world wages matter a lot to individuals.

See one of the founding documents for the US: "The Wealth of Nations" by Adam Smith. Its trade that causes wages to rise. Its infrastructure, investment, and education that keeps us competitive.

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WithoutFroth
#4 2019-03-14 01:47:48

Re: Comparative advantage is why differing wages don't matter

Phillip_McCavity wrote:

See one of the founding documents for the US: "The Wealth of Nations" by Adam Smith. Its trade that causes wages to rise. Its infrastructure, investment, and education that keeps us competitive.

In the long run that's true.  Rather difficult to explain that to a young couple with a kid on the way though.

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Phillip_McCavity
#5 2019-03-14 02:14:37

Re: Comparative advantage is why differing wages don't matter

WithoutFroth wrote:

In the long run that's true.  Rather difficult to explain that to a young couple with a kid on the way though.



They probably want to buy a bunch of stuff that they either don't know how to make or wouldn't be able to make very well.

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WithoutFroth
#6 2019-03-14 02:32:57

Re: Comparative advantage is why differing wages don't matter

Phillip_McCavity wrote:



They probably want to buy a bunch of stuff that they either don't know how to make or wouldn't be able to make very well.

Yeah, typically that's done with wages.

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Caitlyn Dolezal
#7 2019-03-14 04:16:44

Re: Comparative advantage is why differing wages don't matter

Phillip_McCavity wrote:

Comparative advantage says that even if China could make every single good better than the US, there would still be plenty of jobs for us.

No, it doesn't say that at all. In fact, it's explicitly based on the assumption that people who lose their jobs due to trade can be employed doing something else - and that their country for some reason has a competitive advantage in that field.

It breaks down completely in the situation where one country can do *everything* better / more cost effectively than another, since in that case the only activities it will make any sense to carry out in the less competitive country will involve non-tradable services, which by definition can't be exported and hence can't generate any foreign exchange to pay for the tsunami of imports caused by the fact that you aren't creating any material products at all.

The other hole in the theory is that it assumes complete interchangeability of labor - such that you could readily retrain (I.E.) a coal miner and get them to do something else (say design mm wave radio ICs).  Although you could argue this is true given enough training, it's extremely unlikely they would ever become a good MMIC designer.

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WithoutFroth
#8 2019-03-14 07:49:49

Re: Comparative advantage is why differing wages don't matter

Caitlyn Dolezal wrote:

No, it doesn't say that at all. In fact, it's explicitly based on the assumption that people who lose their jobs due to trade can be employed doing something else - and that their country for some reason has a competitive advantage in that field.

It breaks down completely in the situation where one country can do *everything* better / more cost effectively than another, since in that case the only activities it will make any sense to carry out in the less competitive country will involve non-tradable services, which by definition can't be exported and hence can't generate any foreign exchange to pay for the tsunami of imports caused by the fact that you aren't creating any material products at all.

The other hole in the theory is that it assumes complete interchangeability of labor - such that you could readily retrain (I.E.) a coal miner and get them to do something else (say design mm wave radio ICs).  Although you could argue this is true given enough training, it's extremely unlikely they would ever become a good MMIC designer.

You hint at it but you don't quite capture. 

Imagine two countries, Let's call them America and China.

One country has a government that professes and at least pretends to try "All are equal under the law" the other nation says "if you disagree with us we'll use your blood to grease our tank treads... unless you really piss us off in that case we'll work you to death in remote mines and use you as organ sacks for people loyal to our republic"

In this case... FUQ YOUR COMPARATIVE ADVANTAGE...  one nation is trying to achieve the highest ideals of Western Thought,  the other is making chattel slavery look like a pleasant dream in a world of waking nightmares.

Phil, I need you to read this... I need you to understand this...

FUQ YOUR NEOLIBERALISM AND FUQ YOU.

But the GNP though.
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BritneySpearsPussy
#9 2019-03-14 08:20:59

Re: Comparative advantage is why differing wages don't matter

This country was built on tariffs.  We used them to build up our industries while we protected our workers. 

Then around 1979 the rich fuqs decided they wanted to be super-rich, so they worked inside both parties to do away with tariffs by creating international open borders by NAFTA and the Chinese free trade agreement, etc.  The working stiff and middle class?  They would be buggered until their anuses collapsed.

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Tall Bass Turd
#10 2019-03-14 10:14:24

Re: Comparative advantage is why differing wages don't matter

Treatment doesn't come cheap Phil. Just sayin'.

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Phillip_McCavity
#11 2019-03-14 18:35:31

Re: Comparative advantage is why differing wages don't matter

Caitlyn Dolezal wrote:

It breaks down completely in the situation where one country can do *everything* better / more cost effectively than another, since in that case the only activities it will make any sense to carry out in the less competitive country will involve non-tradable services, which by definition can't be exported and hence can't generate any foreign exchange to pay for the tsunami of imports caused by the fact that you aren't creating any material products at all.

This is a common misconception.

Nations have only a finite capacity to produce, and as they produce one good, producing another becomes more expensive. So that will happen when one nation has a natural advantage over another is the advantaged nation will produce some goods, and will leave others to the production of the disadvantaged nation.

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Phillip_McCavity
#12 2019-03-14 18:36:58

Re: Comparative advantage is why differing wages don't matter

BritneySpearsPussy wrote:

This country was built on tariffs.  We used them to build up our industries while we protected our workers. 

Then around 1979 the rich fuqs decided they wanted to be super-rich, so they worked inside both parties to do away with tariffs by creating international open borders by NAFTA and the Chinese free trade agreement, etc.  The working stiff and middle class?  They would be buggered until their anuses collapsed.

You need to study history more. In the late 19th / early 20th century there was a long period of free trade that was accompanied by growth in technology and wealth.

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Phillip_McCavity
#13 2019-03-14 18:39:35

Re: Comparative advantage is why differing wages don't matter

WithoutFroth wrote:

You hint at it but you don't quite capture. 

Imagine two countries, Let's call them America and China.

One country has a government that professes and at least pretends to try "All are equal under the law" the other nation says "if you disagree with us we'll use your blood to grease our tank treads... unless you really piss us off in that case we'll work you to death in remote mines and use you as organ sacks for people loyal to our republic"

In this case... FUQ YOUR COMPARATIVE ADVANTAGE...  one nation is trying to achieve the highest ideals of Western Thought,  the other is making chattel slavery look like a pleasant dream in a world of waking nightmares.

Phil, I need you to read this... I need you to understand this...

FUQ YOUR NEOLIBERALISM AND FUQ YOU.

The point here is that if China (or any nation) really does try such a thing they will only hurt themselves. Their labor will not be used to full advantage and though their goods will be cheap, the cost to their nation will be increased poverty.

With comparative advantage, the invisible hand will fight you.

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